Question #3 (25 marks)

The summary balance sheet of Corrigan Inc. as at December 31, 2019 is as follows:

	Corrigan
Cash	$ 1,000
Accounts Receivable	300
Inventory	520
Property, plant, and equipment	4,000
Accumulated depreciation	(1,800)
	$ 4,020
Current liabilities	$ 410
Long term debt	2,160
Common shares	200
Retained earnings	1,250
	$ 4,020

Effective January 1, 2020, Corrigan purchases all of the common shares of Power Co. for $900.

The balance sheet of Power Co. as at December 31, 2019 is as follows:

	Power
Cash	$ 80
Accounts Receivable	160
Inventory	220
Property, plant, and equipment	1,450
Accumulated depreciation	(800)
	$ 1,110
Current liabilities	$ 60
Long term debt	300
Common shares	120
Retained earnings	630
	$1,110

In determining the acquisition price, Corrigan noted that Power had brand names with a fair value of $120, its inventory had a fair value of $240, and PP&E a fair value of $600. All other assets and liabilities fair values approximated carrying values.

Required:

1. Calculate goodwill to be recorded from the transaction.
2. Prepare the journal entry on Corrigans books to record the purchase of the shares on January 1, 2019.
3. A consolidated balance sheet of Corrigan will be prepared post-acquisition as of Jan 1, 2019.
   1. Prepare the consolidation entries:
      1. To eliminate the investment account and establish the acquisition differential
      2. To allocate the acquisition differential
   2. Prepare a consolidation worksheet post acquisition showing
      1. Corrigan carrying values (post acquisition (including (b) above)
      2. Power carrying values
      3. Eliminations : Dr & Cr columns showing entries for (i) above.
      4. Consolidated values for Corrigan